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CD Equisearch
V-Mart Retail (Hold)
CMP: ₹2,489.35
Target: ₹2,692
The stock currently trades at 51.9x FY20e EPS of ₹47.9 and 42.5x FY21e EPS of ₹58.53. Its pan-India presence with an established network of 224 stores (214 at the end of last fiscal) across 17 States and high customer loyalty (58 per cent of its sales were from repeat customers in FY19), would help it address the growing retail opportunity in India. It is attractively positioned to benefit from products priced below ₹1,000 attracting GST of 5 per cent, constituting about 85 per cent of its total revenue, making it possible to increase its industry share. Further, its ability to keep operating costs under control would help improve profitability.
Yet, significant rise in competition from a lot of regional players remains a challenge. Inability to understand varied and evolving consumer preferences can lead to decreased sales. Expanding business in new markets could affect profitability if the location does not live up to potential demand. Seasonality too is a concern. In view of last fiscal’s performance, we are revising our earnings estimate for current fiscal to ₹47.9 versus earlier estimate of ₹64.03. Weighing odds, we maintain ‘hold’ rating on the stock.
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